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In two separate opinions, a federal judge Tuesday sharply narrowed the scope of a lawsuit filed by Parmalat Finanziaria SPA against Bank of America Corp. accusing the bank of aiding Parmalat’s financial fraud. Southern District of New York Judge Lewis Kaplan dismissed 10 of the 12 claims made by the Italian dairy conglomerate, but allowed it an opportunity to replead one of the charges. Enrico Bondi, who is administering Parmalat while it is in bankruptcy, sued Bank of America and other financial institutions such as Citigroup as well as the company’s former auditors, Deloitte & Touche and Grant Thornton, for aiding and abetting the company’s fraud against investors. He sought $10 billion in damages in the various suits. Weighed down by more than $15 billion in debt, Parmalat filed for bankruptcy in December 2003 amidst a torrent of scandal. The claims against Bank of America involved several transactions allegedly designed to hide Parmalat’s growing financial crisis that spilled into insolvency. In one incident cited in Bondi’s complaint, Bank of America allegedly disguised a set of loans to a Parmalat subsidiary totalling $300 million as an equity investment. Bondi claimed the bank was motivated by the millions in fees it received for its services. Judge Kaplan, in In re Parmalat Securities Litigation, 05 Civ. 4015, allowed the conspiracy and breach of fiduciary duty claims to stand. He rejected the other 10 claims against Bank of America while allowing Bondi the opportunity to replead the racketeering claim. Much of Kaplan’s opinion rested on the application of the in pari delicto doctrine, which shields co-conspirators from charges lodged against each other. He looked to the law in North Carolina, where Bank of America is headquartered and where the suit originated. In the civil conspiracy claim, for instance, Kaplan dismissed the part of the claim involving the bank’s role in the allegedly fraudulent financial transactions. The doctrine shielded Bank of America, the judge said, because Parmalat was an alleged co-conspirator in the transactions meant to defraud creditors or shareholders. The part of the claim alleging that the bank’s actions led to the looting of Parmalat’s assets survived. The other charges included fraud, aiding and abetting fraud, negligent misrepresentation, diversion of corporate assets, unjust enrichment, North Carolina’s Uniform Fraudulent Transfer Act, deepening insolvency, RICO violations and other North Carolina laws. In a corresponding decision, Kaplan held that a Bank of America subsidiary, Banc of America Securities Limited, would fall under the jurisdiction of the court. John Quinn and others at Quinn Emanuel Urquhart Oliver & Hedges represented Bondi. Joseph Tompkins Jr. and other at Sidley Austin Brown & Wood represented Bank of America.

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